5 min read
Welcome to Part 5 and the grand finale in our series What To Do About Bad-Paying Customers. If you haven’t been with us for the journey so far, we’ve gone from defining what ‘good’ and ‘bad’ customers actually are, what escalating your chasing is and when you should do it for best results, the three methods you can use to carry out escalation, and most recently the three last resort “nuclear options” for when your most troublesome customers simply won’t budge when it comes to timely payment.
This week we’re wrapping up on a happy note - all is not lost. PITA Customers can become Superstars. We’re going to show you exactly what you can do to make that happen, saving you time and stress, and most importantly, boosting your cashflow.
Before we dig into the tricks of transforming PITA Customers into Superstars, it’s worth recalling that every PITA was a Superstar once. Preventing a Superstar from ever becoming a PITA is infinitely preferable to building a PITA back up into a Superstar.
The single best thing you can be doing to keep your Superstars Superstars is to always thank them for paying. Never take them for granted - always show your appreciation. Consistent positive reinforcement of their payment behaviour works wonders in keeping it where it is.
In the 1960s, American psychologist Martin Seligman first began research on a human behaviour known as learned helplessness. This behaviour can effectively be summarised as learning to give up, based on past experiences where your best efforts failed. Although each and every new situation is unique and could very well be surmounted this time, those with learned helplessness instilled in them won’t even try.
To bring this closer to home, it’s easy to fall into the trap of believing that your PITA Customers, who you feel you may have tried everything with to get them to change, are destined to remain PITAs forever. This is not necessarily the case, and the technique to transform them into Superstar Customers is deceptively simple.
Of course, we’d be remiss without first mentioning an ugly truth here - if you’ve just gotten to the end of yet another exhausting saga with a PITA Customer, you could reassess whether they’re worth keeping as a customer. Sometimes the pain just isn’t worth it. Kickstart the discussion with the most senior member of the Finance team, weighing up the gross profit on typical invoices with this customer, as well as their past payment patterns (which it’s critical that you monitor).
But for most PITA Customers, and with a little optimism in hand, here’s what you do...
Simple, right? It can be, but the trick is in the execution. For the proud, the pessimists, and the naysayers, who refuse to thank a pain in the a**e consistently late payer on whatever justification they can trump up, I say this - the invoice got paid, didn’t it?
Thank them. PITA Customers become Superstars by being killed with kindness. They know they’re pains in the a**e, no one’s self-awareness is that low. If you never change your tune, they’ll never change theirs.
Now, when you thank them, their guard will be down - this is your chance to positively influence them. What you do here depends on which of these two situations you’re in:
So which is it?
Email them your thanks for them paying, but tack on this question:
“... really excited to continue doing business with you, but I noticed we weren’t quite able to get there with this invoice being paid on time. Is there anything we can do in future that will help?”
If you can get past that frustration you’re holding over late payment, that grudge you may have against them for being a PITA, genuine politeness and a willingness to help them can work wonders in pulling them out of PITA territory and into the shining light of Superstardom. Don’t be aggressive, or worse, passive-aggressive, the right tone here is imperative.
Now, they may not respond to this question, but worded appropriately it cannot do any harm and will leave the thought (and the positivity through which you delivered it) lingering in their mind when the next invoice rolls around, leaving them less justification for delaying payment. If they do respond, though, the information gleaned can only serve to help you. There are any number of factors that could be at play in inhibiting their payment being timely - you may be chasing the wrong person for payment, find out that they’re bad at keeping on top of email chasers and prefer a phone call, or discover their pay runs are only ever done on certain dates. These learnings can be incredibly useful in helping you tailor your chasing to this customer, getting you paid sooner and boosting your cashflow.
In this situation, you have a decision to make. Either way, you should definitely still thank them, but you can only ask for one of these two things - how you can help get future invoices paid on time (like Situation 1, above) or highlight the other current overdue invoices, to get them paid sooner. You can’t effectively do both.
If you decide on the latter, execution is again deceptively simple. Ensure you attach a customer statement to your ‘thanks for paying’ email, summarising the other outstanding overdue invoices. Segue from:
“Thanks for paying X!”
“Where are we with Y?”
And Z, etc., for other overdue invoices.
We’ve summarised Situations 1 and 2 with the below graphic.
It’s worth noting these aren’t one-time tricks. ‘Thanks for paying’ emails might not change your PITAs overnight but if you keep at it, invoice after invoice, continuing to kill them with kindness, you’ll start to see a trend of PITAs evolving back into Superstars.
We hope you enjoyed this series on What To Do About Bad-Paying Customers, taking away actionable insights into your workplace to improve your credit control.
In the coming weeks we’ll be continuing to deliver our most essential insights to help you improve your finance function.
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